fee waivers and reimbursements for the first year only. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
|
1
year |
3
years |
5
years |
10
years |
A
Shares |
$340
|
$620
|
$
920 |
$1,775
|
C
Shares |
$268
|
$604
|
$1,067
|
$2,347
|
I
Shares |
$
72 |
$323
|
$
594 |
$1,368
|
You would pay the following
expenses if you did not redeem your shares:
|
1
year |
3
years |
5
years |
10
years |
A
Shares |
$340
|
$620
|
$
920 |
$1,775
|
C
Shares |
$168
|
$604
|
$1,067
|
$2,347
|
I
Shares |
$
72 |
$323
|
$
594 |
$1,368
|
Portfolio Turnover
The Fund pays transaction costs, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 165% of the average value of its portfolio.
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of
its net assets (plus any borrowings for investment purposes) in U.S. government agency mortgage-backed securities, such as the Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”)
and collateralized mortgage obligations. The Fund may invest a portion of its assets in securities that are restricted as to resale. As a result of its investment strategy, the Fund’s portfolio turnover rate may be 100% or more.
Buy and sell decisions are based on a wide number of factors
that determine the risk-reward profile of each security within the context of the broader portfolio. In selecting investments for purchase and sale the Subadviser attempts to identify mortgage securities that it expects to perform well in rising and
falling markets, such as those which have stable pre-payments, call protection, below par prices, and refinancing barriers. The Subadviser also attempts to reduce the risk that the underlying mortgages are prepaid by focusing on securities that it
believes are less prone to this risk. For example, FNMA or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for refinancing.
The Fund’s Subadviser, Seix Investment Advisors LLC
(“Seix” or the “Subadviser”) anticipates that the Fund’s modified-adjusted duration will mirror that of the Barclays U.S. Mortgage-Backed Securities Index, plus or minus 20%. For example, if the duration of the Barclays
U.S. Mortgage-Backed Securities Index is 5 years, the Fund’s duration may be 4–6 years. Duration measures a bond or Fund’s sensitivity to interest rate changes and is expressed as a number of years.
The
higher the number, the greater the risk. Under normal circumstances, for example, if a portfolio has a duration of 5 years, its value will change by 5% if rates change by 1%. Shorter duration bonds result in lower expected volatility. The Fund may
invest a portion of its assets in securities that are restricted as to resale.
In addition, to implement its investment strategy, the Fund may
buy or sell, to a limited extent, derivative instruments (such as credit linked notes, futures, options, inverse floaters, swaps and warrants) to use as a substitute for a purchase or sale of a position in the underlying assets and/or as part of a
strategy designed to reduce exposure to other risks, such as interest rate risk and credit risk. Further, the Fund may utilize exchange traded futures to manage interest rate exposure.
Principal Investment Risks
You may lose money if you invest in the Fund. A Fund share is not a bank deposit and it is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Debt Securities Risk: Debt
securities, such as bonds, involve credit risk. Credit risk is the risk that the borrower will not make timely payments of principal or interest or will default. Changes in an issuer’s credit rating or the market’s perception of an
issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. The degree of credit risk depends on the issuer’s financial condition and on the terms of the securities.
Debt securities are also subject to interest rate risk, which
is the risk that the value of a debt security may fall when interest rates rise. In general, the market price of debt securities with longer maturities will go up or down more in response to changes in interest rates than the market price of shorter
term securities.
Derivatives Risk: In the course of pursuing its investment strategies, the Fund may invest in certain types of derivatives including swaps, foreign currency forward contracts and futures. The Fund is exposed to additional volatility and
potential loss with these investments. Losses in these investments may exceed the Fund’s initial investment. Derivatives may be difficult to value, may become illiquid and may not correlate perfectly with the overall securities
market.
Frequent Trading Risk: Frequent buying and selling of investments may involve higher trading costs and other expenses and may affect the Fund's performance over time. High rates of portfolio turnover may result in the realization of
short-term capital gains and losses. The payment of taxes on these gains could adversely affect your after tax return on your investment in the Fund. Any distributions resulting from such gains or losses may be considered ordinary income for federal
income tax purposes.
Futures Contract Risk: The risks associated with futures include: the Subadviser’s ability to manage these instruments, the potential inability to terminate or sell a position, the lack of a liquid secondary market for the Fund’s
position, mispricing or improper valuation and that the other party to a derivative transaction will not meet its obligations. The prices of